Australia: Barley, other winter crops area forecast to be up this season

Australia is on track to plant 23.48 million hectares (Mha) of winter crop this year – up slightly on last year’s crop area, Rabobank said in its 2023/24 Australian Winter Crop Outlook published on May 31.

But while area under crop remains high – projected at approximately 0.3pc above last year and 5pc above the five-year average – overall harvest totals are forecast to be lower than last season, with expectations of drier growing conditions due to the likely transition to an El Nino climate cycle, the specialist agribusiness bank says.

“Australia’s harvest potential for the upcoming season is expected to be below the recent consecutive bumper harvests,” the report says. However, it could still be “a decent total”, keeping Australia “well positioned to support global wheat needs in 2023/24”.

Report co-author, Rabobank associate analyst Edward McGeoch said after three years of high rainfall and positive growing conditions in many cropping regions across Australia – which had resulted in a “streak of strong or record-breaking grains and oilseed production” – it was clear Australia was looking to lower harvest volumes in the year ahead with the move to drier seasonal conditions.

“On a national level, the season did not begin as well as in recent years, however April saw improved rainfall totals in several growing regions across New South Wales, Victoria and South Australia,” he said.

Rabobank’s Australian Winter Crop Outlook forecasts planted area for wheat, barley and pulses to all be up for the season, but with canola planting down.

Wheat area is projected to increase 2.9pc on the previous year to 13.44Mha (11.5pc above the five-year average) with barley up 1.3pc to 4.27Mha (though still down 10.4pc on its five-year average). Area planted to pulses is also expected to increase on the previous year to 1.77Mha (though still down 8.4pc on the five-year average).

Canola planting is forecast to be down 8.4pc on last season to 3.32Mha. However, this would still be 21.2pc above the five-year average, Mr McGeoch said.

“Canola plantings have suffered as all other crops have benefited,

“The trend in most states – including Western Australia, New South Wales and Victoria – is that canola planting is down on last year due to the pull back in prices and the drier start to the season which has seen farmers returning to cereal crops within their rotations.”

Assuming normal seasonal rainfall, Rabobank says, wheat production for 2023/24 could be expected to reach 29.9Mt (down 24pc on the previous year), barley 10.8Mt (down 24pc) and canola 5.4Mt (a decline of 35pc).

“With climate models indicating a transition to weak El Nino conditions, we could see production drop lower, potentially to the lowest total crop in four years (at 41.2Mt)”.

By state, crop plantings are expected to be up this year in Queensland, New South Wales and South Australia (by 3.5pc, 3.4pc and 0.3pc respectively). Western Australian planting is projected to be down 2.1pc and Victoria marginally by 0.2pc.

“For several areas across Queensland, early-season rainfall started relatively well, notably in the Fitzroy region, with above-average rainfall totals from January to April contributing to an expected jump in wheat planting,

“In New South Wales, farmers are on track to plant a very large crop for the fourth consecutive year. Year-to-date rainfall in New South Wales has provided a full soil-moisture profile across the southern parts of the state.”

South Australian total plantings are expected to remain relatively stable compared with last year, up just slightly to 3.8Mha.

Planted hectares in Western Australia, while down, remain slightly above the five-year average. Wheat plantings have also bucked the trend in the state, rising marginally.

“Lower soil-moisture profiles, due to lack of opening rainfall this year, have led to reduced plantings across the state, with little assistance provided for strong early crop establishment,

“The risk of a dry outlook is also a consideration given the autumn break was not as widespread as in recent strong seasons.”

Victorian overall crop plantings are expected to fall slightly from last year to 3.5Mha, although various regions in the state are showing increased area.

Export opportunities for the upcoming winter crop remain positive for Australia’s key market in South-East Asia, the report says, with freight charges declining back to 2020 levels and with Australia’s position as a favourable origin market.

Assuming the development of weak El Nino in 2023, Rabobank’s base case forecast would have 15.7Mt of wheat from the 2023/24 crop (not including carryover stock from the 2022/23 season) heading to export markets, with continued strong global demand for wheat. Australia’s exportable barley and canola surpluses from 2023/24 production would be expected to reach 3.3Mt and 3.4Mt respectively.

In terms of global grain markets, recent price declines may reflect an only temporary oversupply of crops in a complacent global market that is assuming nothing goes wrong later in the year.

“Current global prices may be too complacent, given the political and seasonal risks around the world,”

“In the short term, there is enough grain available on global markets.

“However, if we look even a little bit further, a myriad of potential issues are bubbling away.

“The obvious is the Black Sea grain corridor collapsing during Ukraine’s export season, but also Canada is becoming hot and dry, Argentina and the US remain dry and we now see Australia also becoming drier.”

Global wheat prices have collapsed 58pc from record levels seen in March 2022. However, Australian wheat prices have held up comparatively well, dropping just 20pc in the period, albeit from lower levels.

“Whether the local wheat prices continue to hold up well despite the global price decline depends on the outcome of local production,

“If Australian wheat production is more favourable than expected, basis could decline to negative levels.”

Globally, Rabobank forecasts Chicago Board of Trade (CBOT) wheat would trade on average between US624c/bu and 683c/bu over the next 12 months, but upside above this range could be possible.

Locally, it forecast Australian Premium White (APW1) wheat track prices would trade on average nationally, between A$340/t and A$380/t over the same period.

“How strong local prices remain will also be determined by whether drier conditions persist or not.”

The fate of barley prices will partly hinge on the outcome of negotiations to lift Chinese tariffs. Pending this, for now, Rabobank forecast Australian feed barley would continue trading at a heavier-than-average discount to wheat over the next 12 months, on average nationally between A$230/t and A$270/t track. The high premiums seen last year for malt barley should not be expected in the current season.

Rabobank forecasts Australian national non-GM (genetically-modified) canola prices to trade, on average, between A$560/t and A$670/t over the coming year, with GM canola trading at an A$20/t to A$50/t discount.

On average, Australian farmers will increase fertiliser application this season

“This is the result of a decline in farm input prices after recent spikes, making fertiliser more affordable,” Mr McGeoch said, “as well as expectations of good returns from farming.

“Urea prices are expected to track around current levels, or with a minor increase, in the coming months,”

Application of urea is projected to be up 4pc on last year, potash up three percent and phosphate 2pc.

“However, this would still be below the long-term average use of these fertilisers by Australian growers,” Mr McGeoch said.

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